Mar. 11 - The Federal Communications Commission on Friday gave its blessing to the Qwest-US West merger - but rather than breaking out the champagne, Qwest chief Joe Nacchio blasted his future partner for foiling a potential deal with Deutsche Telekom.

"There was a great opportunity here,"
Nacchio said Friday in an interview broadcast on CNBC. "The tactics deployed were bizarre at best, and now the opportunity has been lost." US West on Thursday rejected a $95per-share offer from a suitor, reportedly Deutsche Telekom, because it wanted at least as much money as it would be getting under the Qwest offer - $103.74 a share based on Thursday's closing price of US West.

US West had been left out of negotiations for a week while rumors circulated in the press that Qwest was entertaining an offer from another buyer. US West said it would consider a new bid only if it were to take effect after the merger with Qwest closes.

"Not a very shrewd tactic" Nacchio said US West's decision to reject the offer without negotiation was "not a very shrewd tactic because it blew up in their face." The action blew up in Qwest's face, too. The company's stock dropped $7.75 a share Friday to close at $52.25. US West's stock also took a dive, closing at $70.37, down $6.12. The drop in Qwest's shares reduced the value of the US West acquisition to about $55 billion from $63 billion.

Nacchio's jabs are the latest episode in the US West-Qwest soap opera that has industry observers questioning whether the two feuding companies will ever make it to the altar later this year.

"Right now, the market is nervous that they won't be able to keep (the deal) together because of the strong personality differences," said Tom Burnett of Merger Insight, which tracks mergers and acquisitions, speaking of Nacchio and US West CEO Sol Trujillo.

The merger crossed an important milestone Friday, however, when the FCC approved the deal, saying it "would quickly open its local market to competition and speed up the deployment of advanced services to customers." The Justice Department already has given its approval to the merger.

The FCC wants to review all details about the sale of Qwest's long-distance customers in US West's region to assure that agreements between buyer and seller comply with long-distance restrictions. US West is among the large regional phone companies barred from selling long distance service until the local markets are open to rivals, and Qwest will be subject to those conditions.

US West officials lauded the FCC's announcement, saying they were moving ahead quickly to get the deal done, despite personality clashes.

"I think regulators understand why we proposed this merger in the first place,"
Trujillo said in a release. "This isn't your typical "more-of-the-same' merger. This is a different dynamic combination." But that excitement wasn't echoed by Nacchio, who, in two separate interviews Friday, only briefly mentioned the regulatory win, normally considered an important step forward in telecom mergers.

"You would normally be breaking out the champagne to get the FCC approval so quickly," said Burnett of Merger Insight. "Yet here they're treating it like almost like - who cares? That's not a good sign." Burnett said Qwest-US West received the OK from the FCC in just five months - a lot quicker than similar recent Baby Bell deals, including SBC-Ameritech, which took 14 months, and GTE-Bell Atlantic, which has been waiting for more than a year.

Both companies say they're committed to closing the merger as planned, despite the tensions that caused Trujillo to announce last week he wouldn't stay on with the new company after the merger.

"We have an airtight deal," US West spokeswoman Anna Osborn said. "Everything else will work itself out." Merger likely delayed

Nacchio said Friday the close of the merger will likely be delayed several months until the third quarter because of state regulatory holdups. The two companies must get approval from seven of the 14 states where US West has its operations, but Minnesota's commission may not vote on the deal until August.

The Salt Lake Tribune reported Friday that the upcoming hearings in Utah should be contentious. Competitors and some consumer advocates have a list of issues they want the Utah regulators to address before approving the combination.

Qwest must find a buyer for its long-distance assets in US West's 14-state territory as part of the FCC approval. Nacchio said Qwest was in discussions with a buyer for its long-distance assets and said the company should announce news "soon." He said moving forward on the deal is important in the telecom industry.

"Time is a competitive weapon," Nacchio said. "You have to get these things done." Analysts speculate that Qwest may use regulatory holdups as a way out of the deal if that need for speed isn't met.

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